Thursday, February 7, 2013

Debunking the New Deal Argument (Part 2)

On Monday we began dealing with the New Deal Argument that liberals love to present: "The New Deal got us out of the Great Depression." Today, we're going to handle the second part of this argument, known as Military Keynesianism.

There is a second aspect of the New Deal Argument, which admits that
it was indeed World War II was the reason that the United States got out
of the Great Depression but claims that the government spending of
World War II was the specific impetus for recovery, thus claiming the
World War II spending by the government and subsequent recovery was an
example of successful Keynesian Economics.

Now first of
all, Keynesian Economics in it's pure form speaks to government
spending in terms of investment. The World War II spending by the United
States government was not investment it was consumption. Two, and this
is far more important, the branch of Keynesian Economics known as
Military Keynesianism essentially preaches that this military spending
CREATES demand, rather than the other way around.

For
those of your from Palm Beach County, this akin to saying "We produce a
lot of military supplies so we therefore will HAVE a demand because of
that increased supply."

In reality, what occurred in
World War II was an organic demand not a created demand. (It turns out,
no matter how much effort government makes to create a demand, if people
don't organically want or need a new product they will not fly. See:
Chevy Volt.)

Secondly, the argument of Keynsianism is that government can "invest" in various industries and therefore stimulate the economy. (Somehow government spending stimulates the economy, but letting people keep their own money doesn't. If your head hurts, well, so does mine.) Investment, however, involves a level of control. If I "invest" in a company I am somewhat of a partner. To some degree I have a say over what that company does. This is what President Obama has tried to do (to massive complete lack of success) with "Green Energy" leading to huge embarrassing failures with taxpayer dollars like Solyndra (and other, less buzz-worthily named but otherwise equally unsuccessful companies).

Compare this to what the United States government did during World War II. During World War II, the United States government didn't "invest" in military supplies. No. They BOUGHT military supplies. They were not INVESTORS, they were CONSUMERS.

The government acting as a consumer for a Constitutionally valid and appropriate reason is both not a front to freedom and also is not the premise behind Keynesian Economics. Government consumption and government investment are not synonymous. Otherwise, purchasing the Presidential limo would be considered "investing" in Cadillac and replacing Air Force One would be "investing" in Boeing. Also when I bought a can of soda earlier, I "invested" in Pepsi.

Yet again, this example of Keynesianism "working" is based on a faulty premise. Then again, what would liberal "successes" be if they couldn't move the goal posts?